The European Commission estimates that the global market for the Internet of Things (“IoT”) will grow to 75.4 billion devices by 2023. It also estimates that the economic value of spectrum enabled services is at present worth €500 billion per year. This is expected to increase by 200% – up to €1 trillion a year by 2023 – making the availability of spectrum (needed to send and receive data) and the development of 5G technology increasingly significant.

The European Electronic Communications Code, part of the Commission’s Digital Single Market (“DSM”) Strategy, is nearing the end of the legislative process. It contains a range of safeguards aimed at European-level harmonization for 5G and spectrum management, high-speed broadband technology, and seeks to level the regulatory playing field for “Over the Top” (“OTT”) services with that of traditional telecoms services.

City leaders across the globe are predicted to spend upwards of $41 trillion by 2020 to deploy smart city technologies within their locales. From Toronto to Tokyo, cities are vying to harness the benefits of the Internet of Things (“IOT”) in order to help make their streets safer, transportation more efficient, and their environments greener. While exciting, there are a number of challenges facing cities on their quest to get smart. Resources are scarce, building the required infrastructure is expensive and obtaining the necessary consensus and cooperation amongst municipal stakeholders can be downright impossible. For vendors looking to capitalize on this momentum, learning from successful smart city projects and planning around the common conflicts that tend to arise is crucial. Below are a number of best practices gleaned from the strategies and progress of a number of cities who have found success in implementing smart city solutions.

Target Cities Engaged in the Three C’s: Coalition building, Co-ordination, and Collaboration.

For most city departments, resources are scarce and so convincing municipal departments to divert attention away from day to day activities to help make IoT solutions effective for their citizens is an essential, but difficult task. How do you get the sanitation department of a large city to divert precious resources from daily garbage collection to participate in meetings with tech vendors about building and installing connected dumpsters? One tactic vendors should employ is seeking out cities who engage in coalition building early on (ideally prior to launching bids) and who have secured buy-in across those municipal departments essential to the success of the project. One report from Machina Research indicated that cities with the foresight to secure the buy-in necessary to ensure vendors have access to those decision makers and participants essential to facilitating service delivery were successful because it helped all stakeholders avoid roadblocks during implementation. In Mexico City, building coalitions across departments during the beginning stages of a smart project proved crucial in getting departments to allocate resources for strategic projects.

Additionally, cities that develop formal structures to support coordination across stakeholders also often experience successful smart city implementation. If you’re a vendor interested in working with a decentralized city, you may find that coordinating initiatives across many different departments may be especially difficult. In order to coordinate activities among different city departments, the city of Berlin created the Smart City Berlin Network. This central working group made up of over 100 companies and research institutes serves as a dialog partner for Berlin’s policy makers, including Berlin’s Senate Department for Urban Development and the Environment, the mayor’s office and the senate. In New York City, another decentralized city, the Mayor’s Office of Technology and Innovation has likewise facilitated coordination across the city’s various departments, suppliers, and academia to help establish best practices, which in turn has helped it avoid vendor lock in. By targeting cities with formal structures for cross departmental coordination, vendors may experience greater ease in implementation since they will have a centralized repository of know-how and assistance to draw from.

Vendors should also identify those cities engaged in collaboration with other cities. In the EU, the European Commission has created the European Innovation Partnership on Smart Cities and Communities (EIP-SCC), a formal initiative bringing cities together in order to improve urban life and find solutions to common challenges. With the idea that cities will achieve more when they collaborate, more than 80 cities have come together through Lighthouse Projects to share “technical learning, spread the risk of investing in new technology and [allow] technologies tested as part of the Lighthouse program [to] be implemented on a wider scale.” The EIP-SCC also caters to service providers via a marketplace that provides access to a pipeline of projects, partners, toolkits and even funding opportunities. By targeting cities engaged in similar collaboration efforts, service providers will benefit from economies of scale right along with the city it is working with and will gain exposure to other cities working on similar projects (and therefore in need of similar services).

Find (and Help Develop) Educated Stakeholders

Most vendors have horror stories of working on projects that were scoped incorrectly, involved the procurement of technologies or materials that turned out to be not fit for purpose, or involved never ending change requests. This inevitably results in increased costs–for both the vendor and client– frustration, and sometimes disputes. While these situations can occur in every type of vendor-client relationship, their occurrence during projects with tight budgets and numerous stakeholders can be especially painful. Experienced procurement departments with strong policies are adept at navigating these challenges, but the scarcity of resources within municipalities tend to result in procurement departments that are not fully up to speed on the unique issues facing smart city projects. Because smart city solutions are complex (e.g., they constantly evolve and are subject to frequent change, require coordination across multiple service providers, and their outcomes are difficult to measure), sophisticated purchasing processes are especially needed to support the selection of the right vendors to provide complex goods and services. Therefore, vendors working on particularly complex projects should seek to work with cities with sophisticated procurement departments or cities that are actively working to address the information gap. The city of Berlin, for example, established the Berlin Innovation Showroom; a platform designed to provide clearly structured information about innovative products, services and processes to state-owned companies in order to encourage the evaluation and adoption of smart city capabilities.

Cities working to educate the users of smart city technology should likewise be targeted, as users’ adoption of smart city solutions is a key measure of success for the city as well as its vendors. In Bogota, the city council is working to raise its citizens’ information and communication technology (ICT) skills, and has involved local districts, private sector companies and academic institutions. Guyana’s Ministry of Public Telecommunications’ Innovation Department is overseeing ICT training for persons of all ages across the country, collaborating with NGOs to provide computer literacy skills, workshops and certification. However, it’s important to remember that citizens aren’t the only user groups who should receive training. For example, acoustic gunshot monitoring technology was implemented in high crime areas in NYC. The equipment can pinpoint gunshots within seconds, but an operator must review the audio to confirm the recorded noise before alerting NYPD officers on their connected smartphones or tablets. The city quickly realized that, although the project is centered on the technology, training officers to correctly interpret the information they receive is equally important. Here, vendors can play an important role in training user groups to ensure they have the expertise necessary to effectively use smart city technology, thereby increasing the likelihood that such technology will be used and the benefits related to it will be realized.

Making citizens aware of the existence of smart city technology is equally important in encouraging their adoption of the technology, so vendors should target cities that engage in participatory planning and effective marketing. Some cities like Barcelona have allowed residents to participate in the planning of projects by having them vote on options for the redevelopment of certain roads and areas, thereby aligning the tech agenda with the city agenda and ensuring citizen buy-in. In Pune, India, over 350,00 citizens were engaged as part of the assessment process for making funding decisions on smart city projects. Since citizens are ultimately paying for the smart city, vendors should ensure that city authorities are making the benefits visible and accessible.

Conclusion

As a service provider, it is important to target cities who have thought through the myriad challenges of implementing smart city solutions and developed innovative solutions. Likewise, it’s important to keep in mind that most cities are searching for technology partners who can not only scale innovation, but who can help them ensure that the IoT infrastructure and benefits are accessible to users both within and outside of government. Although identifying those smart city projects with a high likelihood of success may be challenging, leveraging the lessons learned from smart city implementations around the world may help service providers quickly identify indicators of success.

Self-driving cars are here. And although these so-called autonomous vehicles (AVs) are expected to reduce the overall number of auto accidents significantly, some accidents are still statistically inevitable. This raises an important question for AV industry stakeholders: when human beings aren’t in the driver’s seat, what accident-compensation mechanisms should come into play?

Earlier this month, the Travelers Institute, a unit of the major auto insurer, issued a white paper on insurance for AVs, “Insuring Autonomy: How auto insurance can adapt to changing risks.” Though some have called AVs an existential threat to the auto insurance industry, the Travelers study sees opportunities. Among its recommendations: that the existing auto insurance infrastructure should be extended to AVs; that AV auto insurance should be mandatory; and that mandatory policy limits should be increased to account for more expensive technology in AVs. The Travelers study weighs auto insurance against the product liability regime as alternative accident compensation schemes and concludes that auto insurance is the preferred first-instance solution.

One of the advantages of the auto insurance regime that Travelers cites is that consumers are already familiar with the existing auto insurance infrastructure, including the basics of purchasing insurance for their cars and filing claims. Travelers also asserts that the auto insurance system generally works well as designed, to compensate victims for bodily injury and property damage in a relatively efficient manner while avoiding unnecessary litigation that the courts are ill-equipped to handle. It further points out that continuing to rely on a conventional auto insurance model will “help to ensure consistency during the long period in which AVs and driver-operated vehicles share the road.”

Tort liability, the report contends, is not well-structured to serve as a primary compensation solution. A product-liability-only compensation regime for auto accidents would force consumers into complex and lengthy litigation even for fender benders. For this reason, a product-liability-only compensation regime would be too costly in most instances for victims, the report concludes, and would likely result in under-compensation.

So if the Travelers study’s prediction is correct, we can expect to see traditional auto insurance products adapt to AVs and the corresponding legal and regulatory infrastructures adjust as well. But absent a legislative or regulatory sea change, the tort liability mechanism for allocating the costs of accidents is unlikely to disappear. Product liability litigation—both for vehicle manufacturers and for their component makers—still seems very much a live risk, even in the bright future of AVs, whether for insurers’ subrogation claims or for accident victims’ uninsured or underinsured losses.

Another recent study, “Strict Product Liability and the Internet of Things,” published by the Center for Democracy & Technology, focuses on how the tort system, and specifically strict product liability, would apply to the designers, manufacturers, and retailers of Internet of Things (IoT) products, including AVs. The paper addresses the challenges of figuring out fault and liability for harms caused by IoT products. One of its conclusions is that because of the complex supply chains for the design, manufacture, assembly, delivery, and sale of IoT products, answering the question “who is liable?” can be more difficult than for many non-digital products. The paper predicts that it may be relatively easier to identify whom the law should deem to be at fault and to allocate liability for IoT products in sectors where the Original Equipment Manufacturer (OEM)/Value-Added Reseller (VAR) model is well-established, such as in the automotive industry.

But this does not mean that managing risk for AVs will be any simpler than for products of the past. For IoT- and AV-related accidents, litigation seeking reallocation of loss through tort liability—whether lawsuits brought by creative plaintiffs’ lawyers seeking primary reallocation, or subrogation claims brought by auto insurers seeking secondary reallocation—must be expected. And the costs of that litigation can be expected to be high. As the CDT report observes, in the past it has sometimes taken many decades for the law to adapt to new technologies, both because it takes time for the costs and harms of the emerging technologies to become evident and for the causal links between particular technologies and resulting harms to be established. Establishing responsibility for AV-related accidents in particular cases can be expected to require highly sophisticated investigations into the roles played by specific components in the vehicle and by the algorithms buried within them. At least in the near term, therefore, we can expect AV-related product litigation to entail disputes over both the applicable legal rules and the nitty-gritty details of individual accidents.

Ensuring protection from liability insurance for that costly AV-related product liability litigation, in turn, may also require expert insurance coverage analysis, both at the underwriting stage and at the claim stage—particularly under current standard insurance offerings, which were not drafted with an eye to artificially intelligent products. Also requiring close scrutiny are the indemnity and insurance procurement clauses in vendor contracts that are designed to transfer or distribute product liability risks among various supply chain participants. Both insurance coverage and the risk-related provisions in vendor contracts are essential pieces in the enterprise risk management puzzle for IoT and AV industry stakeholders, and both warrant careful attention.

This post is part of a series of Covington Internet of Things Updates on autonomous vehicles. For other AV-related updates, please see:

On 9 July 2018, the Economic Affairs Committee of the European Parliament (the “EP”) published a study identifying potential competition law concerns in the financial technology (“FinTech”) sector (the “Study”). Continue Reading

Last month, the European Commission appointed 52 experts to its newly-established High-Level Expert Group on Artificial Intelligence (AI HLG). Consisting of representatives from academia, civil society, as well as industry, the AI HLG’s is tasked with supporting the implementation of the European strategy on AI.

The European Commission announced the formation of the AI HLG in March of this year of this year, and the launch of the group follows other recent action the Commission has taken in the AI space these last few months, including the publication of its “Artificial Intelligence for Europe” communication, which we previously discussed. The AI HLG’s mandate consists of three key components:

Providing the Commission Advice. The AI HLG will advise the Commission on next steps addressing AI-related mid- to long-term challenges and opportunities through recommendations which will feed into the policy development process, the legislative evaluation process and the development of a next-generation digital strategy.

Proposing AI Ethics Guidelines. One of the AI HLG’s most important objectives will be drafting AI ethics guidelines that will build on the work of the European Group on Ethics in Science and New Technologies and of the European Union Agency for Fundamental Rights. The guidelines will cover issues such as fairness, safety, transparency, the future of work, and more broadly the impact on upholding fundamental rights, including privacy and personal data protection, dignity, consumer protection and non-discrimination. The Commission has indicated the draft guidelines will be finalized by the end of this year and presented to the Commission at the beginning of 2019.

Supporting Broader Public Outreach. The AI HLG will also assist the Commission engage in broader public outreach by serving as a steering group for the European AI Alliance’s work. The European AI Alliance and its online platform aim to stimulate debate on AI, and are open to any individual who would like to participate in the debate on AI in Europe. The Commission intends for the Alliance to provide a forum to share best practices, contribute to the AI ethics guidelines, network and encourage activities related to the development of AI.

The Commission put out a call for applications to membership in the AI HLG in March. The final selection of experts includes industry representatives from a cross-section of enterprises and civil society organizations. A full list of appointed experts is available on the Commission’s website.

On April 19, 2018, the U.S. Patent and Trademark Office released a Memorandum to the Patent Examining Corps regarding changes in examination procedure pertaining to subject matter eligibility in view of the Federal Circuit’s Berkheimer v. HP Inc. decision. Berkheimer held that when a claim is directed to an abstract idea, the question of whether a claim element or combination of elements is “well-understood, routine and conventional to a skilled artisan in the relevant field”—which bears on whether a claimed abstract idea can be transformed into a patent-eligible application—is a question of fact.

The Memorandum tightens the permissive language of MPEP § 2106.05 (d)(I.) (“examiners should keep in mind the following points when determining whether additional elements define only well-understood, routine, conventional activity.”) by clarifying that examiners now must base a conclusion that an element represents well-understood, routine, conventional activity upon a factual determination as set forth in Section III of the Memorandum. The affirmative placement of the burden on examiners to support a claim rejection under 35 U.S.C. § 101 by utilizing one or more of four possible options set forth in Section III appears similar to the approach under MPEP § 2142 that assigns to examiners the initial burden of establishing a prima facie conclusion of obviousness (“The examiner bears the initial burden of factually supporting any prima facie conclusion of obviousness.”). See alsoMPEP § 2141 II.

In a memorandum issued June 27, 2018, Deputy Secretary of Defense Patrick Shanahan ordered the establishment of the Joint Artificial Intelligence Center (“JAIC”) within DoD. The JAIC will report to DoD Chief Information Officer (“CIO”) Dana Deasey and has the “overarching goal of accelerating the delivery of AI-enabled capabilities, scaling the Department-wide impact of AI, and synchronizing DoD AI activities to expand Joint Force advantages.” With the creation of the JAIC, the DoD has acknowledged that the AI “effort is a Department priority,” and one to which government contractors should pay attention.

The JAIC will be the primary organizational component responsible for coordinating and executing DoD’s 2018 Artificial Intelligence Strategy, which was delivered to Congress in June. Although an unclassified version of the report is not out yet, the memorandum elaborates upon what is in the report by stating that “A new approach is required to increase the speed and agility with which we deliver AI-enabled capabilities and adapt our way of fighting.”

Timothy M. Persons, GAO Chief Scientist Applied Research and Methods, recently provided testimony on artificial intelligence (“AI”) before the House of Representatives’ Subcommittees on Research and Technology and Energy, Committee on Science, Space, and Technology. Specifically, his testimony summarized a prior GAO technological assessment on AI from March 2018. Persons’ statement addressed three areas: (1) AI has evolved over time; (2) the opportunities and future promise of AI, as well as its principal challenges and risks; and (3) the policy implications and research priorities resulting from advances in AI. This statement by a GAO official is instructive for how the government is thinking about the future of AI, and how government contractors can, too.

The Evolution and Characteristics of AI

Persons stated that AI can be defined as either “narrow,” meaning “applications that provide domain-specific expertise or task completion,” or “general,” meaning an “application that exhibits intelligence comparable to a human, or beyond.” Although AI has evolved since the 1950s, Persons cited today’s “increased data availability, storage, and processing power” as explanations for why AI occupies such a central role in today’s discourse. And while we see many instances of narrow AI, general AI is still in its formative stages.

In a decision that defines how the Fourth Amendment applies to information collected in the digital age, the Supreme Court today held that police must use a warrant to obtain from a cell phone company records that detail the location and movements of a cell phone user. The opinion in Carpenter v. United States limits the application of the third-party doctrine, holding that a warrant is required when an individual “has a legitimate privacy interest in records held by a third party.”

The 5-4 decision, written by Chief Justice John Roberts, emphasizes the sensitivity of cell phone location information, which the Court described as “deeply revealing” because of its “depth, breadth, and comprehensive reach, and the inescapable and automatic nature of its collection.” Given its nature, “the fact that such information is gathered by a third party does not make it any less deserving of Fourth Amendment protection,” the Court held. Continue Reading

Earlier this week, the National Telecommunications and Information Administration (NTIA), the executive branch agency responsible for telecommunications and information policy, released a Notice of Inquiry requesting that any interested party—including the private sector, technical experts, academics, and civil society—help the agency determine its international internet policy priorities. In particular, NTIA is seeking comments and recommendations regarding four topics: (1) the free flow of information and jurisdiction, (2) the multistakeholder approach to Internet governance, (3) privacy and security, and (4) emerging technologies and trends.